In Need of Education Funding, States Look to Customers and Corporations (Governing)

By Liz Farmer 

Public education was one of the biggest casualties of the Great Recession. Nearly a decade since it started, nearly half of states are still providing less general funding for schools than they were the year the economy tanked.

Two states, however, are asking voters to boost education funding this fall — but they differ on who should pay for it: customers or corporations.

Oregon wants to impose a tax hike on corporations with more than $25 million in annual sales in the state. If passed, the measure would raise an expected $3 billion a year. It proposes (but doesn’t require) some of the new revenue to go toward public schools.

Oklahoma, on the other hand, proposes raising the state sales tax a percentage point to 5.5 percent. The state has imposed the biggest per-pupil funding cuts in the country and is facing a teacher shortage. The new revenue, expected to be about $600 million a year, would go straight into a new education fund with more than half of it paying for teachers’ raises. About one-fifth is slotted for higher education and another fifth would help fund early education.

The varying level of support for the ballot measures showcases the political power that corporations have to influence elections.

A poll released this week in Oregon, which doesn’t have a sales tax, shows that voters are evenly split on Measure 97. It’s estimated to impact about 1,000 companies and has generated millions in campaign spending. Opponents have raised about $17 million, mostly from corporations, while supporters have raised just $10 million, nearly all of it from public employee unions.

By contrast, Oklahoma’s Question 779 enjoys a wide margin of support and has generated only a fraction of the campaign spending that Oregon’s Measure 97 has. The ballot measure is championed by University of Oklahoma President and former U.S. Sen. David Boren.

Policy experts say Oklahoma’s sales take hike is frustrating because not only would it impose a greater burden on lower income families but the state has cut corporate and income taxes over the past decade.

“That question of equity is the main reason that our organization, which is committed to fair and adequate funding of services, is torn,” said David Blatt, executive director of the Oklahoma Policy Institute. “No one questions that the sales tax has a greater impact on lower and moderate income households. But at the same time, the funding crisis in our schools and our inability to recruit and retain qualified teachers has a disproportionate impact on low-income students as well.”

Oklahoma has had the nation’s highest drop in per-pupil funding since 2008, and it’s had devastating results for public school students. Nearly one-third of the state’s more than 500 school districts have opted for four-day school weeks; educators haven’t had a raise in nearly a decade; and the state is awarding emergency credentials to help fill teacher vacancies.

Although Oregon’s proposal targets corporations, opponents say they have equity concerns, too: They warn that companies could simply pass on the cost of the corporate tax hike to consumers.

But supporters dismiss that argument, saying it wouldn’t be worth the effort. According to Charles Sheketoff, executive director of the Oregon Center for Public Policy, a company with $26 million in annual sales would pay about $25,000 in additional taxes on their total sales under the proposal.

“If they raise prices … to cover the cost,” he said, “they risk paying a higher gross receipts tax.”

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